Non-cash payment market in Vietnam growing strongly

The non-cash payment market in Vietnam is growing strongly, however, after almost 20 years till now, ATM cards are still used to withdraw cash.

In the days prior to Lunar New Year 2012, ATM card owners in HCM City and other locations were facing hardships because of empty ATMs with many problems. Despite banks made big efforts in applying a lot of measures to deal with the stuck situation of ATMs before Tet but the situation still took place.

Payment card was present in Vietnam from 1994 through POS of international card organizations. In 1996, more kinds of bank cards were launched in 2002, the first domestic debit card branded name Vietcombank Connect 24 was born with the ATM network in Vietnam since which the bank card market really broke out.

In 2006, the market had total 5 million bank cards with almost 3,000 ATMs and 11,000 POS. By the end of 2011, the number of bank cards jumped to more than 42 million including 40 million ATM cards, equaling to over 93%. Infrastructure for non-cash payment also was improved with 13,000 ATMs and 70,000 POS last year.

There are 49 card issuers with over 200 brand names in Vietnam. “The development of bank card service may be seen as the most dynamic section in non-cash payment methods. The bank card growth rate reached 50-60% a year in several years”, said Duong Hong Phuong—Vice Head of the State Bank of Vietnam’s Payment Department.

Mr Vu Viet Ngoan, Head of National Finance Supervision Committee said that boosting non-cash payment would reduce the money amount in circulation as well as help monetary policies of the SBV being implemented better.

But due to the habit of cash usage, most of ATM cards are used to withdraw cash along with the non-synchronic payment support services.

Statistics of Vietnam Card Association indicated that in 2010, over 83.2% of transactions via ATM cards were cash withdrawal; 16.3% was account transfer and 0.5% was the transactions of using cards for payment.

Meanwhile, the country’s card market has 40 million ATM cards. The payment turnover via POS of ATM cards remained modest compared with international cards. For example, the payment turnover of ATM cards at Vietinbank Branch 2 accounted for only 3.5% of total non-cash payment amount.

Actually, connecting POS will help banks save costs for expanding ATM network and reduce number of ATM systems; meet the diversified payment demand of customers. But the big problem in boosting card payment is technological investment capacity of all banks. Unsmooth connection between card systems of banks caused difficulties for card transactions. The failed transaction ratio via POS of Banknetvn was 29%, of Smartlink at 20% and VNBC at 19%.

Nguyen Tu Anh, General Director of Smartlink Card Service Joint Stock Co said that the retail banking market did not lack useful and safe payment tools but was in short of payment accepting system and payment channel while investment cost, connection among banks and service quality and security standard are not equal.